Is Your Association Budget off Track?

By James Bourassa / Published November 2023

During these uncertain times it is common for an association to be over budget due to unplanned expenses. The only thing to do is deal with it head-on. 

Amend the Budget

     An amended budget can be approved by using the same process as was used with the original budget. Timely notice of a proposed amended budget must be presented to the membership. Once approved, regular assessments will reflect the new fees. The benefit here is that the amended dues will be allocated to the operating account. A factor to carefully consider (particularly in condominium associations) is if the budget is increased too much, there could be challenges from owners. The following is the applicable section from statute 718.112 (2)(e):

2.a. If a board adopts in any fiscal year an annual budget which requires assessments against unit owners which exceed 115 percent of assessments for the preceding fiscal year, the board shall conduct a special meeting of the unit owners to consider a substitute budget if the board receives, within 21 days after adoption of the annual budget, a written request for a special meeting from at least 10 percent of all voting interests. The special meeting shall be conducted within 60 days after adoption of the annual budget. At least 14 days prior to such special meeting, the board shall hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association, a notice of the meeting. An officer or manager of the association, or other person providing notice of such meeting, shall execute an affidavit evidencing compliance with this notice requirement, and such affidavit shall be filed among the official records of the association. Unit owners may consider and adopt a substitute budget at the special meeting. A substitute budget is adopted if approved by a majority of all voting interests unless the bylaws require adoption by a greater percentage of voting interests. If there is not a quorum at the special meeting or a substitute budget is not adopted, the annual budget previously adopted by the board shall take effect as scheduled.

b. Any determination of whether assessments exceed 115 percent of assessments for the prior fiscal year shall exclude any authorized provision for reasonable reserves for repair or replacement of the condominium property, anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis, or assessments for betterments to the condominium property.

c. If the developer controls the board, assessments shall not exceed 115 percent of assessments for the prior fiscal year unless approved by a majority of all voting interests.

     The governing documents should also be consulted for any other relevant stipulations or requirements.  

Pass a Special Assessment

     If an urgent need for funds exists, the association can consider a special assessment. Special assessments, while unpopular, have become commonplace, particularly in condominium associations. A special assessment is an assessment levied over and above an association’s annual budget that the owner must pay in addition to their regular assessments. Florida law grants significant latitude to a board of directors to levy special assessments when additional revenue is needed for the maintenance, repair, or replacement of common elements. 

    Special assessments can be the result of an unexpected expense (e.g., insurance premium increase) or the result of associations failing to properly budget and fund their reserves. This can create a difficult situation for an owner on a fixed income, who moved to a community based on the regular assessment amount only to be special assessed after moving in. Those who cannot afford to pay the special assessment may be referred to collections. This unfortunate and unintended consequence illustrates the need to properly fund the budget and reserves in order to spread out association expenses. 

     The governing documents will dictate what type of vote is needed to pass the proposed assessment and any required voting thresholds. Florida law specifies that adequate notice (a minimum of 14 days) is provided and posted on property. The notice must specifically state that assessments will be considered and provide the nature, estimated cost, and description of the purposes of such assessments. The funds collected can only be used for the specific purposes stated in the notice. It is highly recommended that the association’s attorney be involved in the special assessment process from start to finish. If special assessments are not properly levied, they can result in costly litigation.

James Bourassa

Vice President of Property Management, Seacrest Services

     In 2009 James joined the Seacrest family. James served as a community association manager, primarily handling gated HOA communities. James dedicated himself to providing the highest level of service to his communities boards of directors and residents. In May of 2018, James was promoted to the position of regional director and brought his strong work ethic, professionalism, and customer service experience to his new role. As a regional director James continued his growth and knowledge of the industry as well as the art of negotiations, diplomacy, relationships, and leadership. In March of 2022, James was named director of property management. In March of 2023, James was promoted to vice president of property management. For more information, visit seacrestservices.com.